Occidental Petroleum was downgraded to junk by Fitch Ratings as it struggles to combat a sharp decline in oil prices, making it the biggest fallen angel in this downgrade cycle.
The exploration and production company’s long-term default rating was cut three levels to BB+ and may be downgraded further, Fitch said in a statement late Friday.
Fitch is the second credit rater to downgrade Occidental, following an earlier ratings action by Moody’s Investors Service, officially making it a fallen angel. Its $35.2 billion of debt will leave investment-grade indexes at the end of the month, and it will be the largest high-yield issuer.
Occidental’s bonds have been battered as an OPEC price war and the coronavirus outbreak has taken WTI crude down briefly below $20 a barrel, dragging much of the energy sector into distressed levels.
Several investment-grade companies like Apache Corp. and Marathon Oil Corp. have also been flagged as potential peers to follow Occidental to speculative-grade indexes.
Occidental has tried to preserve its finances by cutting its dividend for the first time in 30 years, as well as reducing capital spending.
It’s also holding talks with investors to address its debt, and activist Carl Icahn is nearing a truce with the company that will see three new directors appointed to its board.
Occidental’s 2.7% bonds due 2022 fell 2.5 cents to 60 cents on the dollar, according to Trace.